Supreme Court judgement on captive mine crucial for Posco

South Korean steel manufacturer Posco faces a critical moment as India’s apex court takes up for hearing the grant of a captive iron ore mine in Odisha.

Posco hopes, once some of the country’s leading lawyers have delivered their final arguments, the Supreme Court will clear the grant of a captive iron ore mine for its proposed steel plant.

A favourable judgement could potentially rescue what was once the largest single foreign investment into India from its seven-year-long wait.

Steelmakers like Posco are willing to put up with difficulties and delays in less developed but mineral-rich states only to secure key mineral resources.

The state of Odisha, which produces a third of the country’s iron ore and a party in the case, had recommended a 200 million tonne reserve of ore at Khandadhar, Sundergarh district for Posco that went into litigation.

With land issues unresolved at the site near Paradip, Posco is reconciling itself to a smaller plant of 8 MT for now. A favourable judgment won’t just be a big relief, but will be critical for the viability of the steelmaker’s proposed 12-MT-per-annum coastal plant.

An judgement not favourable to Posco will reward Geomin Minerals and Marketing’s two-decade-long wait for mining rights to some of these areas in Khandadhar.

The case, say industry watchers, will have to reconcile to recent Supreme Court judgements, considered as landmarks by the mining and metal industry. The first covers the state’s rights to reserve an area and the other concerning its right to prioritise future value addition of the mineral, like in the case of iron ore.

Geomin, in its plea has argued that Odisha could not have granted a prospecting licence to Posco, because its applications filed fourteen years earlier, regarding an area that overlaps with the site of Posco’s plant, were still to be disposed of.

As per rules, unless the area is notified, applications must be addressed on a first-come-first-serve basis, all other merit criteria being equal.

Posco, though, is banking on the Supreme Court’s recent judgment in a matter concerning iron ore deposits at Mauza Ghatkuri in Jharkhand. Because of possible implications, the bench hearing the ‘Monnet Ispat and Energy vs Union Of India and others’ case also heard the arguments of counsels for ‘Geomin’.

In its final order, of July 26, the court upheld the state’s rights as owners of natural resources to reserve an area for its Public Sector Undertakings (PSUs).

Where Odisha stands to benefit in its argument is that Khandadhar (like Ghatkuri) was reserved for state use back in the 60s. An earlier Orissa High Court judgment had set aside this reservation. If validated now, that would sanctify the notification of the area, thus allowing the State to choose Posco over Geomin, if it believes Posco’s more meritorious.

Geomin though, still wants to wait for the final verdict in another case of ‘Sandur Manganese and Iron Ores versus State of Karnataka and Others’.

In Sept 2010, the apex court in a landmark judgement had maintained that the state had no authority under the current laws “to make commitments to any person that it will, in future, grant a mining lease in the event that the person makes investment in any project”.

It did have the right to differentiate between the end use of the minerals, for example, the use of iron ore to produce sponge iron instead of steel, or the use of gold in jewellery as compared to medicines.

The court has agreed to Kalyani Steels and Jindal Vijayanagar Steels (JSW) pleas for a review of the Sangur order by a larger bench that will take it up on September 4. Geomin has sought an adjournment of its case until this is over.

[Source — The Economic Times]

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